The Spanish province of Andalusia was widely known for its high inheritance tax rates. Since the tax authorities were assessing the inheritance tax on the theoretical value of the properties concerned (irrespective of the market value) and some properties in Andalusia are difficult to be sold, many families gave up their inheritances because they were not able to pay the inheritance tax due.

However, in January 2019, the new centre-right government of Andalusia agreed to change the inheritance tax laws in such a way as to virtually eliminate the inheritance tax, except in some cases which will be examined in more detail below. The radical change is a result of a long-term campaign initiated by political activists.

The inheritance tax changes aim to make Andalusia a tax-friendly jurisdiction that is attractive for local and foreign investors. The changes in Andalusia are in line with similar tax reforms in other regions of Spain (e.g., Balearic, the Basque Country, Canary Islands, Catalonia, La Rioja, Madrid, Navarre, and Valencia).

Application

The new Andalusian inheritance tax regime apply to taxpayers, estate beneficiaries, and inheritors who are EEA/EU residents. The following persons can benefit from the new regime: (i) biological and adopted children under the age of 21; (ii) biological and adopted children over 21, adoptive parents, registered civil partners, spouses, grandparents, and great-grandparents.

Under the new inheritance tax regime, no inheritance tax will be paid on estates having value equal to or below 1 million euro. Estates that have value exceeding 1 million euro will be subject to inheritance tax only on the value that exceeds 1 million euro and the amount of the tax due will be reduced by 99%. This means that taxpayers who need to pay inheritance tax on estates exceeding 1 million euro will pay only 1% of the tax due.

It should be noted that the new tax regime does not apply to family members not specified above or inheritors who are not family members. Nevertheless, the regime is certainly good news for people who wish to invest or live in Andalusia.

But for foreigners who lives in Andalusia or in Spain sometimes things are more complicated, so tax and estate planning is always a good thing.

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